The financial plan sets out the approach that the organization will use to allocate the budget that has been provided. Depending on the maturity of the asset management organization, the financial plan should be undertaken for the short (basic), medium (proficient), and long (advanced) term. This will give the organization a transparent view of its financial commitment. The financial plan should provide details of the funding required to be delivered. The breakdown of the financial plan should align with the work types and volumes. The plan should also include the impact of different levels of funding on the network, such as the impact on performance.
When governments or senior leaders in the organization have not committed to the budget, the financial plan must demonstrate the funding required to meet the performance set out in the asset management policy and strategy. The financial plan, however, will only be based on the planned work that will be undertaken when the organization has committed to the budget. This planned work may be adjusted depending on the budget allocated. It should be noted that lifecycle planning, described in Chapter 2.4,2 Lifecycle Planning, should be used to determine the most cost-effective means of achieving the financial plan.
When setting and agreeing on budgets with the senior leaders in the organization, it is important that asset managers make a strong and robust case to invest in asset maintenance. The financial plan should therefore demonstrate that the transportation infrastructure maintenance activity can only be efficient if it is planned in the long term and the asset management practices described in this guide are adopted.
A practical example of demonstrating the benefits of long-term funding include investment in preventative maintenance techniques, which may provide significant value for money when compared to more expensive treatments that are applied based on a “worst first” approach.
Ideally, the most effective financial plans cover between 5 and 15 years. This means that the allocation of resources, and especially of financial resources, has to be anticipated well in advance so organizations can plan accordingly.
The financial plan therefore supports organizations in identifying both the required and available financial resources in future years. As such, it is an essential document to support the exchanges between the senior leaders in the organization, road owners, financing authorities, and those responsible for asset management. Its main function is to do the following: